Residential real estate has continued to boom during the pandemic, with the Canadian market taking the lead in growth. Alex Kenjeev, President of O’Leary Ventures, discusses whether or not the housing market has reached bubble territory.
Should you be investing or buying the hottest cryptocurrencies right now? The trending on social media, should you be buying real estate? Should you be concerned about a potential housing bubble? And finally is a stock market in a bubble. These are all topics we'll be exploring with our next guest, Alex Kenji, president of O'Leary ventures.
Alex we've had you on the show a couple of months ago. Welcome back. It's always a pleasure, exciting topics we have prepared to discuss today. Welcome. Great to be here. Nice to, uh, it's nice to see you again to see you too. We're going to start with the trending one. Doge coin shot through a shot through the roof last week up at least 300%.
It's somewhat stabilized. It's gone down that it's gone up, but anyway, it's, it's gone from a few cents to 40 cents and in a very short amount of time, people are jumping on the bandwagon and people are wondering whether or not they should be submitting to the FOMO, so to speak. Of buying something they potentially missed out on.
What do you think? Such wow.
Wow. Money. No. Um, but the thing with these meme plays, right? Meme, stocks, uh, meme coins. There is some, uh, truth to the silly, you know, the idea that it's silly to invest in something because it's funny or because other people are doing it. On the other hand, you have to temper that with the reality that a lot of things you could think of as a meme, you know, the original idea of meme before the internet was really any cultural idea that replicates.
So I think when people say that something is a meme stock or a meme play, I think what they're really worried about is not that it's our self-replicating idea. That's actually a good thing. Uh, what they're really worried about is that it's an idea that won't have staying power. And that's really what you need to be thinking about with these types of plays.
Is it, if you're, are you putting money into something that, uh, just as quickly as people got excited about it, they'll dump it or, or not? I think that's how I would approach. You know, any of these, a hot kind of coins or stocks that are suddenly jumped and you got to ask, why is that happening? And is it going to translate into a longterm sticking power?
What's your, what's your view on cryptocurrencies as a whole, especially as a, as a, as the name suggests a currency, are they a currency? Elon Musk? I, I was watching, uh, a brief interview. He did over the weekend and he said, uh, you know, he said that doge coin was created as a joke. It was meant to be a satire.
It was meant to make fun of cryptocurrencies, but he said that the irony of fate would have it, that. Maybe it'll become more of a currency than potentially Bitcoin very thing. It was supposed to make fun of that. Could that potentially happen? Well, I mean, it's really hard to pick winners in advance with things like this.
Yeah. There's definitely a great utility and a very strong case to be made for some constellation of cryptocurrencies and blockchain assets to become. You know, much more important parts of the financial system in the economy than, than they've been before. Uh, whether at any given coin, uh, well, dominate is really hard to say.
I mean, who could have predicted 20 years ago that Netscape navigator would be dead and gone, you know, uh, Chrome came out of nowhere, you know, uh, and, um, you know, the first mover isn't necessarily the winner on these things. Yeah, for sure. Well, you know, we were talking offline about meme stocks in general.
It just mean investments. Is there anything wrong with this approach, Alex, if I were to just go on Reddit and follow whatever's trending on wall street beds, or if I were to follow influential, uh, economic or industry leaders like Elon Musk, just follow what? Just basically by whatever he tweets out, it seemed to have worked with GameStop, AMC who doge coin, Bitcoin, whatever he, whatever, whatever they want to hype up.
Let me just jump on the bandwagon. What's wrong with that approach. I have trouble finding a problem with that approach. That kind of makes sense to me. I w I don't know if I'm, I dunno if I would put a hundred percent of my, uh, my assets into that kind of, that kind of strategy, but I wouldn't put a hundred percent on any single strategy.
And in fact, there are some people doing that. There are a there's at least one website. Uh, that actually tracks and posts the frequency of mentions of various, uh, stocks, you know, by ticker on places like Reddit. Um, so I wouldn't be surprised if there are some hedge funds already doing. Exactly that, you know, just, you know, trying it out a couple percentage of their AUM, just to see what happens.
The criticism here is that maybe this is a big pump and dump scheme. Maybe the influential figures are in it. They just want to pump it up and then sell their holdings when it went. Is there any, have you seen anything like this in history? Have you, have you seen such cases before that would warrant some concern on your part as an investor?
Where you mean cases where the, when he tries to hype something up just to dump it as soon as the price goes up? Yeah. I mean, it depends who you're talking about. Uh that's you know, there's definitely, and it's frequently a concern. Right. And I think part of the reason, uh, some of these, uh, meme plays that we're seeing right now are so.
Have sort of captured the Zeit guy so effectively is that it seems to be not the case this time around at least. And we look at GameStop for example, uh, you know, the DFV, as far as I know, he's still holding and if he ever stops, he'll sort of transmit that to his followers. He, the expectation is that he won't do that to them.
And you know, if you on Musk is pumping something, I have to assume from his obscene. Uh, net worth that it's not gonna really matter to, you know, pumping and dumping some coins. It's not going to, I just can't imagine why he would bother doing that. So I, I think, you know, but look at the same time, if you want it to actually seriously build a strategy around this, you could just program that in.
Right. You could make a strategy that says, look, you know, once dimensions hit a certain critical mass. You know, we, we take money off the table or something like that. So I, yeah, I think it's a valid concern. Let's talk about real estate. Now you were talking about, um, working from home and, uh, I wonder how that's going to affect the real estate market because whether or not you're renting or you own a, for most people, real estate and housing is a big component of their spending and it takes a big chunk out of their disposable income.
I'm going to show you this chart now. Uh, we talked about this chart, offline Canada, Australia, France, Britain, us Ireland, Germany. So a subsect of, uh, of the or not all of them other than she's having the rich, rich economies, as you've seen all of the, most of them have, have, have gone up Canada in particular, have.
That the housing market here has continued to skyrocket despite the pandemic. I wonder why that is. Can you, I can't wrap my head around it. Why is it that housing prices have gone up during a time when people can't even leave their homes? I would imagine it would be difficult to even go and buy a house.
Yeah, I think you just said it within your question. You probably hit on three of the biggest factors, right? While people can't leave their home. So, of course, they're going to want a nicer home at the same time, it's harder to buy a home. And so that means there are more buyers looking for the same number of homes that are being sold.
So you have pressure on the, on the demand side from both of those things. And then the third thing being the, just the shift in what's possible and what seems to be desirable right. Where people are. Suddenly looking for, you know, more bigger backyards, right? Uh, they're not as worried about a longer commute because maybe they may never have to go to the office or they may be anticipating that going forward.
They'll only go into the office a couple of times a week, something like that, or once a week. And so. Yeah. What we're seeing is a lot of, uh, a lot of surging, uh, activity and prices in places like, you know, you mentioned Canada, you know, places like Waterloo that are a couple of hours away from a major urban center.
Think about places that are. Uh, sort of like a, the widest possible ring, you could draw around any large city. And I think you'll see in, in most of those markets, uh, lots of activity in the United States in particular, there is another trend over and above that, which is that back in the early days of the previous presidential administration, there was a large change to the tax code.
Where the state and local interest taxes were no longer would no longer be deductible on federal taxes. Now that it's kind of a, uh, you know, it's, that debate is, you know, kind of old news, but what I think has been happening and what we've been seeing is that a lot of people living in States that were adversely affected by this places like New York, California.
Uh, you know, they may have previously just been grumbling about how their taxes have gone up as a result of this, but I'm able to really do anything about it because their job was in those places. Well, now a lot of those people are actually picking up and moving or their entire companies are picking up and moving to places like Florida and Texas.
And that really gets reflected in the overall national housing prices because of the immense pressure that, and sudden pressure that puts on places like. You know, Miami or Austin or Dallas. Do you think that, uh, overall, if you look at this chart again, do you think that in the markets and particularly with North America, can't, let's just focus on North America, Canada, and the U S do you think we've reached a point where we can call it a housing bubble?
If investors were to be concerned and ask you, Alex, are we going to see 2008, 2007 all over again? What would your response be? Yeah, I think, I think that's a legitimate concern. I don't think you would see it across the, by the way, which you didn't in 2008 either. I don't think you would see it across the entire housing market, but certainly in pockets, if you look at the mortgage delinquencies rate, which is where you haven't yet, or where or where you've defaulted, but you haven't actually been foreclosed.
Uh, those numbers are publicly available. You know, you can look them up and you can see that the overall rate is North of 10%. Uh, I believe at the moment in the United States and you know, that's, that's a big number now. The good news is if you have a delinquency situation and you're in one of these frothier markets, it's entirely possible that even though the bank will foreclose on you at some point, Uh, well, first of all, the bank may not have to foreclose on you cause you could, you might be able to sell your house and get more than enough to pay off the mortgage and get a down payment out of it on your next one.
Right? So you might be okay. The danger is in places where you have a confluence of, uh, of these high delinquency rates and. Uh, lower prices as a result of, you know, the inverse, right? The places that people are moving out of. And there is that is happening the, the us and Canadian as well. I'm not as familiar with the other countries on that chart, but I wouldn't be surprised to see the same pattern, uh, that the, the overall lift masks, a series of.
Ups in some places in downs and other places, I was reading about a larger markets in the U S San Francisco, LA, even New York where people were, these cities were experiencing last summer, a mass Exodus, especially from younger workers who wanted to leave and work somewhere remote. Uh, and perhaps some find some place that's cheaper to rent, uh, because they could now, right.
The, the, the work from home environment allowed them to do so now that put a lot of tremendous downward pressure on the landlords for the F I've never heard of anybody lowering the rent yet it happened, especially in the law, in a large market that San Francisco, that's an unheard of what is this? Yeah,
we have some multi-family investments with. W with, uh, vacancy rates, you know, North of 10% in perfectly good neighborhoods where we've never had any vacancies. It's crazy. And there's, and then the decision is, you know, the operator has to decide, well, do I just lower the restaurant radically and right. To get the vacancy or, or do I hope for a bounce back and keep it vacant?
And I think people are making different, different landlords are making different decisions regarding that. Yeah. So if someone were to say, Alex, I want to purchase a home. Let's suppose I know there's different markets. Let's assume they live in a big city, like a, like a metropolis, uh, Toronto, New York, San Francisco, whatever.
Have you, I want to purchase a home, a condo, a single unit home. It doesn't matter. It's maybe my first home or second home. I want to purchase it for an investment. I want to rent it out. Let's say, would that be a wise decision to make at this time? Yeah. Yeah, I would definitely. Definitely do that. I mean, look, you have to do your due diligence on these, on these specific home or neighborhood or asset subclass that you're looking at.
It don't get me wrong. Right. Just because I'm bullish overall as general advice that I would give, if a friend were asking me that doesn't mean that they should just throw caution to the wind, you have to be careful and judicious, but look balanced the sort of bubble concerns on the one hand. Against, you know, you had mentioned, you had, you mentioned, um, uh, in, you know, inflation being on the horizon as an example, right.
Uh, of concerns that people have. Well, you know, the market overall tends to believe that inflation is coming, as you could see that in the tenure notes. Uh, right. And, and in the yield curves now at the same time, you know, the federal reserve is, uh, Is talking about holding interest rates low, depending on if you take them at their word or not.
They are talking about 20, 23 at a minimum before rates go up. And so in a situation like that, as long as you are using it for the, for something reasonably safe, you kind of want debt. You don't really want to be debt free in a sense, because if you're holding cash, Your cash is going to go down in price at the city.
And so is the value of what you owe. If you borrow a hundred dollars and in real terms, five years later, it's only worth 95. What's that saying? You don't want to be debt-free I don't think so. No. I mean, look, let's see.
Okay. Yeah. I mean, look consumer debt. I'm not, I'm not, I'm not, I'm not defending my seniors should go on a shopping spree on your credit card. Right. But if we're talking about borrowing money against, uh, against assets where you think that the asset will continue to appreciate, or is likely to continue to appreciate, even if it's only slight, right, or at least hold its value in real terms.
Um, meanwhile, the debt is denominated in dollars, which will become less valuable over time as the, as, as inflation Rose them away. You know, it's a good time to be, to be playing that kind of game as long as you're careful. Maybe, maybe I'll take out a loan now, Alexa, buy some doge coin. I don't know about leveraging up for doge coin.
That's. Exactly what I meant by putting it into something safe. This is to our last topic, personal finances, what you should be doing with your money right now. Now we've had a difficult economy last year. A lot of people were laid off. Some people I know, personally lost their jobs are coming back into the job market now.
So they have a little more, more income than the data. Couple months ago, if you're in the States, you might have received stimulus checks. You know, a funny fact I've learned it actually is that overall personal income in the U S actually woes during the pandemic. And that's because on average, those people who haven't lost jobs still received stimulus checks.
So their, their gross income actually increased, uh, compared to pre COVID levels, which I find interesting. But anyway, let's suppose you're one of those people who have more income now, what should you be doing with that money? You know, at the risk of sounding, uh, insensitive to those who are not lucky enough to, to have this opportunity.
I would say that if you, if you have a bit of extra Dell and if you have gotten your first and second vaccines, I would, uh, I would travel actually. I would at least book tickets and plan to travel because really, if you're in the United States, Uh, and a small handful of other places. Uh, it's a very unique window of opportunity right now where you, your, your vaccine, uh, the us is ahead of most of the countries in terms of the rate of people who have been vaccinated.
Meanwhile, there's a whole world out there of places that are dying for, you know, some, a little bit of tourism dollars. Right. And, uh, they, can't not just anybody can go and take advantage because most people in most countries haven't been, uh, accident or had that opportunity. So, uh, I think if you can do it safely, right?
Don't, don't go to a country where the, where the hospitals are full or, or near capacity, because then. You know, heaven forbid you break your leg or something, and then, you know, they, they can't help you or, or even worse. They, they do help you, but you're displacing somebody who needs the bed for COVID don't do that.
Right. But if you can do it safely, you know, most data now is saying that, uh, the vaccine not only protects the vaccinated person, but in all likelihood on a preponderance of the evidence, uh, almost eliminates. Uh, the chance of, uh, asymptomatic transmission, which is the scariest type, right? The kind where you, you don't know you have the virus, but you're giving it to someone else.
So, uh, that's what I would do. Do you think people are, uh, getting ready to travel? Let's take a look at some of these charts here. So in the us we've had, well, No surprise to anybody domestic and international flights volume have, or volume has decreased by orders of magnitude compared to pre COVID levels.
What's interesting to me is that, uh, the second largest economy right now, China, they've already seen a pickup in domestic flights. Uh, their annual percent change has, is actually positive right now, but look at their international flights. No one's leaving. It's still a negative close to a negative a hundred percent.
No one's going out of the country where it's. So it seems according to this chart from the economist, um, I wonder why no, one's adopting this getting ready to travel attitude right now because China was actually one of the first countries to reopen their economy following COVID maybe there's a cultural yeah, it's, it's a fascinating chart.
And, um, You know, in a sense that highlights the opportunity, I think, right. If everyone else was doing it, it wouldn't be such an interesting idea, uh, of something that you could try. Right. So that's one way to look at it. I think China's also a unique case, as you say, right. They had very, very early lockdowns and they also had a situation where China or many parts of China were sort of in a waste of relative safety.
Uh, even though it wasn't because. There was a preponderance of vaccines. Right. They got, they actually had successful locked down, you know, the U S sorry. Um, I meant to say, uh, China, um, uh, right. Uh, Taiwan and I might actually be, I can't even think of any other examples of places where the lockdowns actually worked, you know, fully worked.
Like we just got rid of the, of the issue so that Oh, New Zealand, right. Where you could just go out to, you know, to a restaurant and just live more or less normally. Well, not exactly normally, but almost normally. Right. And I think that, so that, that data may not carry over to places like the States, but to the extent that it does, if you were to show me a similar chart that said that Americans are traveling only within the States, I would say no, all the more reason to go abroad, like, because.
If no one else is doing it, then the demand must be really low. And the prices of, you know, really nice place to stay or a really good, uh, flight, uh, would be much lower than you would normally expect to see. Excellent. All right. Well, thank you for that personal finance advice and, uh, your outlook on the markets are large.
I appreciate your comments, Alex. Thank you for being here today. Always a pleasure. Oh, it's a pleasure to have you. Thank you for watching Kitco news. I'm David Linn. Don't forget to subscribe. If you're watching this on YouTube. .